[RUSL] update

In the backlink I provided the model chart below while commenting, "To be clear, After calling pretty much the exact bottom (so far) I bailed on RUSL in the extended trade today.  My primary model is for a pullback to the level of the prior 4th but since the coming drop would be wave 2 up following a long bearish spell we always have to be looking for that deep vee second and of course this could also fall into a 5th wave down.  That is what I hope is does..."




So, after gaining 80% off the bottom, today's action saw RUSL give back 21%.  So much for buy and hold, especially near the big turns.  Nobody can do this except for Elliotticians.  This kind of volatility confuses abd scares everyone else but it is our playground.


Right now it could have bottomed although it would have been more satisfying to see it fill the gap completely.  This was only a partial gap fill for RUSL and not even that for RSX (which RUSL is a derivative of).  Additionally, this recent move down could count as 5 down. So instead of spec buying back in today I decided to cool my jets and not get all excited.  I need this to give good evidence that it is not going to pull a double bottom (owl ears) deal on me. Falling below that lower green support line would strongly suggest that this is going to have an inclining double bottom.   It might go down and fill the lower gap even.


If this is going lower, it won't likely go straight down.  It will form a B wave and for all I know, B is already in progress.  For example, this smells to me like a bull trap and bull traps are often set using flats and expanded flat (EF) corrections.  It is so easy to overlook them if you are in a hurry.  You see 5 waves up off the bottom and forget that the prior bottom was not 5 waves down but rather only 3.  When you see that, think TRAP.  3 waves down is not motive.  Its likely part of a larger corrective move.  Typically the traps are sprung quickly.  So if this is the case here, expect a pop and drop (pop at the open and then rapid plunge as wave C plays out.  If we see this, buy big time at the end of 5 of C and then of course as always set your stops.

We already know what wave 1 up looked like:80%. I can only guess that wave 3 will be much higher with ridiculous percentage gains.

While this model is about odds and not about certainties, if you avoid getting excited and just calmly go set up your Gatling gun where the model tells you the money herd is going to pop out of the bushes, you and I will be mowing them down together. 



Failing that, this will fall to a lower low than the late august low that I thought could likely be the bottom for commodities.  If so then maybe 10% downside from the prior bottom call to the long term RSX support line.

The chart below uses RSX not RUSL.  Careful, they are about the same price right now.  But since RSX has no time value in it it you get a cleaner chart. I presented the chart below in this post but the version below has a bit more data and it is clearer to read.

But seriously, the setup here is literally once in a lifetime and it can only be understood through the lens of the Elliott wave principle.   The chart below says that RSX (as in the un-leveraged version of RUSL) bottomed in 2009 and that the bounce into 2011 was wave 1 (or A) up.   The recent crash has been 2(or B) down.  Guess what comes next?  That's right, 3 or C.  It will go to a much higher high than the prior high of $44.  First guess at that would be $55 but let's let the wave count be our guide, shall we?  That's because this could also turn into a HT (sideways), perhaps peaking where the red arrow stops before turn back down.  Still, that's a fat gain.

What makes this so valuable is that blue 1/A and blue 2/B are separated by a HT.  That guarantees that this is a corrective way and thus cannot go below the 2009 low.  There are very few times that "cannot" applies to the markets but with this count, this is one of them.  Of course, even if the model is wrong we will know very quickly because the model is certainly wrong if it goes 1 penny below the 2009 low.

I think there is a good chance this will turn into an inverted owl.